Discoms need info-tech solutions

Submitted by VK Gupta on Sat, 10/11/2012 - 6:11am

Discoms need info-tech solutions

SAURABH KUMAR
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Revenue leakages are the norm in most power distribution undertakings. The use of IT tools and process automation can enable managers to identify and plug leakages.

November 9, 2012:
The power sector in India witnessed impressive growth in capacity during the 11th Plan with over 55,000 MW of new capacity added. Though this is almost 2.5 times the previous Plan achievement and the best performance by the power sector since independence, it has fallen short of meeting the rising demand of a growing economy.

The frequent power outages during last summer and the momentous twin grid failures are pointers to the fact that much more needs to be done before India can fulfill its goal of providing universal access of reliable electricity at affordable rates to all its consumers. In his recent remarks, the Prime Minister has set a goal of achieving this goal in the next five years.

The reforms in the power sector started in the early 1990s with 100 per cent FDI, with repatriation of return on equity in dollar terms, allowed in generation. However, private investment has not been enthused to the power sector. The reason for this situation is the distribution sector, which is on the verge of financial bankruptcy. This increases the risks on investments and, therefore, an attractive 14-16 per cent post-tax return on equity, guaranteed through tariff, has been unable to leverage the levels of private investments that are needed.

Restructuring SEBs

The distribution sector, which is the prerogative of State governments, has gone through structural reforms in 2002-03 and the monolithic State electricity boards (SEBs) were unbundled into separate generation, transmission and distribution utilities.

Financial restructuring of the SEBs, with the objective of improving operational efficiency to sustain the reforms, was also undertaken. It was realised that the losses are much more than merely technical losses; the definition was amended to Aggregate Technical and Commercial (AT&C) losses with the inclusion of losses due to theft, unbilled power, etc that were hitherto left out.

Almost a decade of distribution reforms has had a mixed outcome. Some States have been able to attract private investment, while most others have been faltering, particularly in advancing the financial health of the utilities.

Under-recovery of costs

There are many reasons for the present state of affairs, many of which have been addressed from time to time by the Governments. The most recent one has been the announcement of the large financial package for States, targeting the distribution utilities’ short-term debt. However, at the core of the issue is the fact that, in many States, there is large scale under-recovery of costs through tariff. The collection efficiency in many States is abysmal (table).

The data, made public by the Power Finance Corporation (PFC) for all State utilities, highlights the following:

High proportion of cost under-recovery is leading to rising financial losses;

Many of these States have not invested at levels necessary to upgrade and automate distribution infrastructure. As a result, there is no accountability at any level for arresting the unbilled power or theft.

Billing and collection infrastructure is archaic, while at the same time the enforcement of anti-theft measure has been practically absent.

The low levels of revenue realisation is primarily on account of two reasons — consumers who are not been billed at all (power theft) and/or consumers who are billed, but the amount due is not collected.

Given that both classes of consumers are connected to the grid, effective monitoring and control could drastically improve the situation as seen in many States. This will require increased transparency of operations, effective management of infrastructure and organisational will to correct the situation.

IT-enabled infrastructure

Undeniably, use of IT is necessary for achieving the outcome by real-time monitoring as well as reinforcing accountability at all levels in the utility. Such interventions could enable a business case at substation level with due accountability for energy input and revenue realisation.

Aggregation of such efficient and robust business models through IT-enabled infrastructure, could have the answers that are needed.

The distribution reform package under implementation during the last 10 years has emphasised the need for large-scale use of IT during the last five years. The Restructured Accelerated Power Development and Reforms Programme (R-APDRP) has emphasised the centrality of IT-enabled infrastructure for actual and demonstrable performance enhancement of distribution utilities for achieving optimal system efficiency and sustained loss reduction.

The reform measures under R-APDRP include establishment of reliable and automated system for collection of accurate base line data, adoption of information technology (IT) in areas of energy accounting at feeder/substation level and providing wherewithal to the management to oversee performance and enforce internal accountability.

Feeder segregation

These IT tools and process automation are intended to provide the managers real-time status of energy input and match it with revenue realisation and billing processes.

Such automation will not only map the consumption billed and revenue realised at individual user level, but will enable mangers to identify leakage source and, thereby, implement corrective measures to plug them.

Linked to this is the important reform measure of segregating feeders, particularly where there is a mix of agricultural and domestic load. This has been one of the main sources of leakage for the utilities, going by the report published by PFC.

Taking advantage of the fact that agriculture consumers are given electricity free (or at heavily subsidised rates), mixed feeders promote vested interest of those who have been traditionally booking unbilled electricity as agricultural consumption. Absence of energy accounting standards at feeder/substation level has added to the inability of the management to arrest this. The exercise of feeder segregation has been slow to take off in most of the States listed above.

Distribution business is the cutting edge of the electricity value chain and its failure to recover revenues does not augur well for the sector as a whole. The low levels of revenue realisation leads to a cascading effect on viability of upstream investments in the transmission and generation infrastructure.

The interest of the investors has been restored by a slew of reforms implemented in the last few years starting with the Electricity Act, APDRP, setting up of independent regulatory commissions, and so on. If the distribution sector is unable to ramp up its capacity and become financially viable, the renewed interest of investors is not likely to be sustained for long.

The Centre has announced a financial restructuring of the SEBs, running into a couple of lakhs of crores, to make the distribution sector financially viable.

Increasing the levels of revenue realisation, enhancing efficiency of operations, continuity and professionalism in management leading to reliability of service are steps that are urgently needed at the State level.

The power situation last summer brought out the restiveness of the consumers, making it imperative for the utilities to embark on reform agenda and cater to the genuine needs of a growing economy.